Video Conferencing Revenue Drops, but IDC Analysts Are Optimistic

Revenue in the market fell 2.6 percent in 2012, but quarterly trends and business enthusiasm for video conferencing give analysts hope for 2013.

Revenue in the worldwide video conferencing equipment market continued to decline in the fourth quarter of 2012, though there are growing reasons for optimism that things could improve in 2013, according to IDC analysts.

The video conferencing space has shown a steady decline in revenue for several quarters, thanks in large part to the slowing sales of high-end, expensive immersive telepresence systems. That trend continued during 2012, when revenue during the year in the multi-code immersive telepresence segment fell 32.8 percent, the second year in a row that revenue in that part of the market dropped after hitting its top numbers in 2010, the IDC analysts said in a report released Feb. 27.

That led the way for a continued revenue drop for the entire video conferencing space. According to IDC's numbers, revenue for all of 2012 hit $2.64 billion, a 2.6 percent decrease from the $2.71 billion generated in 2011.

For the fourth quarter, revenue in the market hit $739.8 million, a drop of 8.6 percent from the same period in 2011.

However, despite the declines, there were numbers that gave analysts encouragement that the market could turn around this year. Though fourth-quarter revenues were down when compared with the fourth quarter a year earlier, they were up 14.9 percent over the third quarter in 2012. In addition, while the video network infrastructure segment of the market saw revenues fall 4.5 percent in 2012, room-based video conferencing and personal video conferencing saw revenue grow 4.1 percent and 5 percent from 2011, respectively.

Some of top players in the market also saw revenue grow between the third and fourth quarters of 2012, the analysts said.

"Several of the video vendors pointed to the difficult global macroeconomic situation, fiscal uncertainty, and cutbacks in spending in key areas such as the public sector, including government and education, as reasons for the challenging annual 2012 results," Rich Costello, senior analyst with IDC's Enterprise Communications Infrastructure program, said in a statement. "But most of the vendors enjoyed good fourth-quarter results as interest in video continues to grow among organizations, especially those with good use-case requirements. IDC views this as perhaps a small step towards an enterprise video market rebound in 2013."

Cisco Systems, the perennial leader in the space, saw revenue in the fourth quarter fall 19.8 percent from the same quarter in 2011, but jump 19 percent from the third quarter of 2012. In addition, its leading market share grew from 43.3 percent in the third quarter to 44.8 percent in the fourth.

Polycom's fourth-quarter revenue grew 5.7 percent from the third quarter, though they were down 18.5 percent from the fourth quarter in 2011. Polycom, which aggressively rolled out new products and services throughout 2012, saw its market share stand at 23 percent at the end of the year. Huawei Technologies, whose officials in September 2012 said they were planning to expand their competition with Cisco beyond networking and into video conferencing, saw revenue jump 34.8 percent between the third and fourth quarters, and 119.7 percent from the fourth quarter in 2011. The company saw strong growth in the Asia-Pacific and Latin American regions, IDC analysts said.

Video conferencing got a boost during the global recession in 2008, as companies looked for ways to improve employee productivity while reducing expenses such as travel costs. Over the last few years—with such trends as cloud computing, mobility and bring your own device (BYOD) taking hold—vendors have begun pushing more of a software story around video communications, looking to enable users to participate in video conferences from wherever they are and on whatever device—such as smartphones and tablets—they chose. The software push is coming both from established players like Cisco and Polycom as well as smaller vendors like Vidyo and Blue Jeans Networks.

Video conferencing also is becoming a larger part of vendors' overall unified communications and collaboration (UCC) offerings, according to Petr Jirovsky, senior research analyst for IDC's Worldwide Networking Trackers Research program. Organizations continue to push for video as part of their UC initiatives.

"Despite the overall weak 2012 performance in the worldwide enterprise videoconferencing market, we still see adoption being driven by interest in doing video integrations with vendor UCC portfolios and business processes, as well as the increasing use of video among small workgroup, desktop and mobile users," Jirovsky said in a statement. "Video as a key component of collaboration continues to place high on the list of priorities for many organizations."